The impact of sustainability on millennial purchasing

Sustainability seems to be a buzzword these days. There is a noticeable growing trend of sustainable products from companies with missions that go beyond profit. What is the driving force behind this trend, and how can businesses ensure that they are staying relevant among consumers? One key to understanding this shifting consumer sentiment are millennials, the 22 to 38 year-olds who are set to become America’s largest demographic. Millennials care more about sustainability than any other generation, and their purchasing reflect this. This post will cover the social issues millennials care about, how a brands sustainability affects their purchases, and what great businesses can do to succeed.

Do Millennials actually care about sustainability?

According to a recent Nielsen Report, when asked about sustainability, 75% of millennials said that they would change their purchasing and/or consumption habits to reduce their impact on the environment. This was significantly greater than the 46% of Gen X and 34% of Baby Boomers. Furthermore, 83% of millennials found it to be extremely or very important that companies implement programs to improve the environment.

What issues do millennials actually care about? The Millennial Impact Report found civil rights, employment, healthcare reform, and climate change to be the most important causes. However, climate change and environmental causes were most influential on purchasing.

How does social responsibility affect purchasing?

While missional companies create positive change in society, the environment, and people’s lives, there is strong evidence that having a strong, recognizable Corporate Social Responsibility (CSR) increases revenue. It’s no wonder that sales of consumer goods from brands with a demonstrated commitment to sustainability have grown more than 4% globally, while those without grew less than 1% (Nielsen).

As Millennials enter their peak consumption years, spending among this group in the US. is set to increase to $1.4 trillion by 2020 (Accenture). In fact, by 2020, millennials will drive 30% of total retail sales. What effect then, does sustainability have on their purchasing and view of companies? Here are some quick stats:

More than 9 in 10 millennials would switch brands to one associated with a cause (Cone)

73% of Millennials are willing to pay more for sustainable brands (Nielsen)

How can companies respond?

After developing a sustainability or social-impact mission, companies have to find a way to communicate it to their customers. Nielsen’s Global Sustainability Report identified three basic messaging tactics to accomplish this: claim only, marketing only, and a mix of claim + marketing.

The report found that claim marketing was the most effective, driving a 7.2% growth in sales but by far the most uncommon, with only 2% of brands doing this. However, this strategy resonates with millennials, of whom 51% check the packaging for sustainability claims before making a purchase. The report suggested that this could be a strong strategy for new brands that don’t have large marketing budgets.

Both claim-only and claim + marketing tactics drove a 4.3% growth in sales. Nielsen found that marketing-only approaches were commonly used by home-goods categories, while consumable goods had a heavier use of claims. This “suggests an opportunity for consumable products that focus solely on marketing to add claims to their overall strategy for increasing growth.”

While companies may quickly jump to adding a CSR message, there is one caveat that must be considered. Research by Stefanie Robinson and Stacy Wood of NC State’s Poole College of Management found that adding statements of social good can actually create negative inferences of product quality for new firms. They AB tested consumers reactions towards a sock line from a new brand. One video showed the VP, in an interview, praising the quality of socks while the other video showed the VP praising the mission (donate one pair for every purchase.) What the study found was that consumers more negatively viewed the brand when it focused on the social mission rather than product quality. This is because consumers didn’t have proof of product quality. However, the study found that new firms were best off when they emphasized both product quality and social mission simultaneously. On the other side, established firms with reputable products were better off emphasizing their social mission because consumers already believed they had high-quality products.

Conclusion

Companies that have strong social or sustainable missions are set to capture the market share of millennials, and likely all U.S consumers, into the 21st century. Hopefully, we will move into a better world, where companies work together to solve social and environmental issues while engaging with and capturing the love of their customers.

If you are interested in creating sustainable products or missions, contact MindSumo! Our users are made up of millennials who want to drive innovation for companies. Together, we have helped companies strategize sustainable packaging concepts, think of meat alternatives, ideate ways to clean up the Ganges River, identify wastewater treatment technology, and much more.